Policies and Regulations for Private Sector Renewable Energy Mini-Grids
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Copyright © IRENA 2016 Unless otherwise stated, this publication and material featured herein are the property of the International Renewable Energy Agency (IRENA) and are subject to copyright by IRENA. Material in this publication may be freely used, shared, copied, reproduced, printed and/or stored, provided that all such material is clearly attributed to IRENA and bears a notation that it is subject to copyright (© IRENA 2016). Material contained in this publication attributed to third parties may be subject to third-party copyright and separate terms of use and restrictions, including restrictions in relation to any commercial use. ISBN 978-92-95111-45-5 (Print) ISBN 978-92-95111-46-2 (PDF) About IRENA The International Renewable Energy Agency (IRENA) is an intergovernmental organisation that supports countries in their transition to a sustainable energy future, and serves as the principal platform for international co-operation, a centre of excellence, and a repository of policy, technology, resource and financial knowledge on renewable energy. IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy, in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity. Acknowledgements The report benefited from valuable comments and feedback provided by Tom Burrell (ACCESS), Daniel Schroth and Jeff Felten (African Development Bank), Michael Franz (Africa-EU Renewable Energy Cooperation Program), Marcus Wiemann and David Lecoque (Alliance for Rural Electrification), Nicola Bugatti (ECREEE), Peter Weston (Energy4Impact), Bozhil Kondev and Luis-Carlos Miro Baz (GIZ), Dipti Vaghela (HPNET), Madhusudhan Adhikari (Independent expert), Henning Wuester, Álvaro López-Peña, Arslan Khalid and Paul Komor (IRENA), Debajit Palit (TERI), Xavier Vallve (TTA) and Bikash Pandey (Winrock International). The report also benefited from consultations conducted with Ibrahim Togola (Access), Giuseppe Buscaglia (Acra Lumama), Tom Price (All Power Labs), Ashok Chaudhuri (Ankur Scientific Energy Technologies Pvt. Ltd.), Mike Bergey (Bergey Windpower Co.), Rachel Child and Benjamin Hugues (Camco Clean Energy), Balthasar Klimbie (Clear Resource), Fabio De Pascale (Devergy), Mady Mbodji (ENERSA), Chris Service and Caroline Nijland (Foundation Rural Energy Services), Sandeep Giri (Gham Power), Sameer Nair (Gram Oorja), Leo Schiefermüller (JUMEME), Brian Shaad (Mera Gao Power), Vijay Bhaskar (Mlinda Foundation), Rajesh Manapat (OMC), Dipendra Bhattarai (Practical Action), Asma Huque (PSL/PGEL), Vivian Vendeirinho (RVE Sol), Rin Seyha (SME Renewable Energy Ltd), Didar Islam (SolarIC), Andy Schroeter (Sunlabob), Adrian Banie Lasimbang (Tonibung), and Stefan Gsänger (WWEA). The report has been developed under the guidance of Rabia Ferroukhi and Salvatore Vinci (IRENA) and has been authored by Salvatore Vinci, Divyam Nagpal and Bishal Parajuli (IRENA); Nico Peterschmidt and Michael Rohrer (Inensus); and Chris Greacen (Independent consultant). For further information: [email protected] This report is available for download from www.irena.org/publications Citation: IRENA (2016), Policies and regulations for private sector renewable energy mini-grids. International Renewable Energy Agency, Abu Dhabi Disclaimer This publication and the material featured herein are provided “as is”, for informational purposes. All reasonable precautions have been taken by IRENA to verify the reliability of the material featured in this publication Neither IRENA nor any of its officials, agents, data or other third-party content providers or licensors provides any warranty, including as to the accuracy, completeness, or fitness for a particular purpose or use of such material, or regarding the non-infringement of third- party rights, and they accept no responsibility or liability with regard to the use of this publication and the material featured therein. The information contained herein does not necessarily represent the views of the Members of IRENA, nor is it an endorsement of any project, product or service provider. The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region, country, territory, city or area or of its authorities, or concerning the delimitation of frontiers or boundaries. Access to electricity is a central building block of socio-economic development. It empowers people and communities to increase their income and productivity, enhance their access to healthcare, water and education, and improves their overall well-being. Without universal access to modern energy services, achieving the Sustainable Development Goals set for 2030 will be nearly impossible. Extending power to everyone, especially at such a rapid pace required, cannot be done solely through national electricity grids. An estimated 60% of the additional power generation needed to achieve universal access must come from off-grid solutions. Most of these will involve mini-grids – isolated, community-level power grids, which can eventually be absorbed into the main grid or may continue to operate autonomously. In business terms, the case for either mini-grid or standalone systems to supply renewable power to underserved communities has never been stronger. Costs have fallen dramatically – over 80% since 2010 for solar photovoltaics (PV) – while technologies have continued improving. Adnan Z. Amin Renewable energy mini-grids have a proven track record of delivering cost-competitive Director-General electricity services in rural areas. Traditional deployment models led by public utilities, IRENA non-governmental organisations and communities, are being complemented with private sector approaches. From local entrepreneurs to large international utilities, interest in the development, financing and operation of mini-grids is growing. Policies and regulations for private sector renewable energy mini-grids aim to support policy makers in the design of enabling policy and regulatory frameworks. The report examines licencing, tariff regulation, risks related to main-grid arrival, and access to finance – the key factors investors in mini-grids consider. The report finds that mini-grid configurations respond differently to the policy and regulatory environment. It analyses the specificities for mini-grids based on solar, biomass, wind and small hydropower, or a combination of these with other energy sources. These should be fully understood to develop the right policy mix. This report comes as part of a broad stream of work by the International Renewable Energy Agency on how to expand energy access through the accelerated deployment of renewables. I am confident that it will inform policy making on mini-grid deployment and support the achievement of both electrification and development goals. A Renewable Energy Roadmap CONTENTS List of figures, tables and boxes .........................................................4 Abbreviations .........................................................................6 EXECUTIVE SUMMARY ..........................................................7 INTRODUCTION .................................................................13 01 1.1 Traditional approaches to mini-grid development .....................................15 1.2 Increased focus on the private sector ................................................16 1.3 The development cycle for mini-grid policy and regulation .............................17 THE ROLE OF MINI-GRIDS IN RURAL ELECTRIFICATION ..................19 02 2.1 A multi-tier framework to classify electricity access. 19 2.2 Renewable energy–based mini-grids and the multi-tier system .........................21 2.3 Deployment models for different combinations of technology and tier ..................21 2.4 Conclusion ...................................................................... 46 POLICIES AND REGULATIONS TO SUPPORT 03 PRIVATE SECTOR MINI-GRIDS ............................................... 49 3.1 Legal and licensing provisions ..................................................... 50 3.2 Cost-recovery and tariff regulation. .54 3.3 Mitigating the risk posed by the arrival of the main grid. .59 3.4 Policy measures to facilitate access to finance ........................................65 3.5 Policy design for different combinations of technology and service tier. .78 3.6 Conclusion ...................................................................... 90 TRANSLATING RECOMMENDATIONS INTO 04 POLICIES AND REGULATIONS ................................................93 4.1 Classifying policy and regulatory measures ..........................................93 4.2 Implementation of policy recommendations through primary measures. 95 4.3 Implementation of policy recommendations through secondary measures ...............98 4.4 Implementation of policy recommendations through tertiary measures ................101 4.5 Conclusion ......................................................................103 References ..........................................................................104 3 POLICIES AND REGULATIONS FOR PRIVATE SECTOR RENEWABLE ENERGY MINI-GRIDS LISTS OF FIGURES, TABLES AND BOXES LIST OF FIGURES LIST OF TABLES Figure 1.1 Meeting multiple Sustainable Development Table 2.1 Access to household electricity: Goals through renewable energy ....... 13 A multi-tier matrix